A small, sub-scale mutual fund player adopted a McKinsey mutual fund strategy that was slated to boost sales by 25% and net present value by 20%.

Background

A small, sub-scale mutual fund player had negative sales growth and was wondering whether to stay in asset management, and if so, whether to manufacture its own products or sell sub-advised or non-proprietary mutual funds.

Analysis and Teamwork

The McKinsey team first modeled the profitability of mutual funds by style and compared the incremental profitability and benefits of sub-advised, non-proprietary and proprietary funds.

To set a product-management strategy, the team assessed the value proposition and the client-product story to FAs and to institutions. It rationalized the current mutual fund lineup and gauged opportunities with other products, such as exchange-traded funds and managed accounts.

To address distribution issues, McKinsey assessed mutual fund marketing and pricing, including management fees and the expense ratio. The team weighed whether to expand into new distribution channels.

To improve operations and servicing, McKinsey determined the level of service to be provided through FAs and institutional sales, and decided which functions should be outsourced and to whom.

The team then detailed implementation planning. The client committed to remain in asset management, which was supported by McKinsey economic survey findings that players of all sizes could be profitable if focused in terms of products and channels. Style by style, clear decisions were made on how to build and offer a full product range, including both proprietary and sub-advised products.

Results

The new strategy was forecasted to improve the client's sales by 25% and to improve net present value by 20%.